Urgent action is needed to tackle an impending skills shortage if the UK is to remain one of Europe's most attractive locations for car manufacturers, according to a new report.

A study by the Society of Motor Manufacturers and Traders (SMMT) found that firms have built reputations for quality and engineering excellence.

Automotive companies based in the UK now export to more than 150 countries, regarded as a positive factor for the sector's future.

But the report, compiled by KPMG, warned that the prospect of a shortage of skilled workers poses a risk.

Skilled engineers are becoming increasingly sought after in the wake of advances in technology and the growing importance of low carbon, said the report.

The study also called for firms which supply car-makers to be "reinvigorated".

Paul Everitt, chief executive of the SMMT, said: "With unprecedented levels of investment committed to UK automotive in recent years, the future for our industry is bright.

"It is clear that domestic suppliers have the potential to benefit significantly from increasing output volumes, but they need the right mix of Government support and private investment.

"With robust global markets and a diverse mix of models produced here, we are more resilient than other countries to eurozone weakness, a key factor in encouraging businesses to invest in the UK."

John Leech, KPMG's UK head of automotive, said: "Over the past year and a half, almost all of the major UK vehicle manufacturers have announced new model production plans, capacity enhancements or workforce hires in the UK.

"All of this inward investment into Britain's automotive industry shows long-term commitment by global automotive industry players. As a result, vehicle production is expected to increase for at least the next three years, in spite of weakening demand from the eurozone."

Business Minister Michael Fallon said: "This report reinforces the message that investing in the UK auto sector makes good business sense.

"We have some of the most productive plants in Europe, a highly skilled and flexible workforce and one of the lowest corporation tax rates in Europe.

"We have a good track record, with global vehicle manufacturers investing £6 billion in UK projects over the last two years.

"However, there is no room for complacency. Government and industry are working together to make sure our supply chain companies exploit the £3 billion of opportunities that have been identified by the Automotive Council."